Why has India-U.S. trade deal been delayed? | Explained

The story so far: India and the US announced in February 2025 that they would work on a comprehensive Bilateral Trade Agreement (BTA) to be completed by Fall 2025. Then, in February 2026, they signed a framework agreement for an interim trade agreement to be implemented in April-May 2026. Neither agreement came into force. Hindu It explains the latest issues causing delays.

Why was BTA postponed?

Shortly after Prime Minister Narendra Modi and US President Donald Trump announced their intention to complete the BTA in February 2025, it became clear that a comprehensive agreement would be difficult. The talk among government officials was to complete at least the first tranche of the deal by Fall 2025 (September-November 2025).

Talks intensified after April 2025, after Mr Trump first announced reciprocal tariffs on ‘Emancipation Day’ and then paused them for 90 days so he could negotiate deals with US trading partners. However, despite many meetings, India and the US could not finalize the first tranche; India’s reluctance to open up its agriculture and dairy sectors and its decision to buy oil from Russia were major sticking points.

In two successive statements in late July and early August, Mr. Trump raised tariffs on imports from India, first to 25% and then to 50%; the second increase was a punishment for India’s imports of Russian oil. With this decision, negotiations were frozen for a few months, then the issues were resolved again and negotiations resumed in October.

What is an interim agreement?

After talks resumed, Mr. Modi and Mr. Trump signed a framework for an interim agreement on trade in February 2026. This was not a trade agreement, but a framework within which to work. At the time, Commerce Minister Piyush Goyal had expressed confidence that the deal would be completed by April or early May 2026 at the latest.

Under the framework, the US would reduce total tariffs on Indian imports to 18%, providing a competitive advantage over its rivals. Both parties pledged to provide preferential market access to each other in “relevant sectors”.

Why was this agreement postponed?

Shortly after the framework was announced, the US Supreme Court invalidated the reciprocal tariff system itself, saying that the law on which it was based (the US’s International Emergency Economic Powers Act) did not allow such tariffs. This removed an important foundation on which treaty negotiations took place.

Since then, the United States has made several decisions that have further increased tariff uncertainty.

Immediately after the Supreme Court ruling, Mr. Trump announced he would impose a flat 10% tariff on imports from all countries under the Trade Act of 1974, saying the law gave him the authority to take action to address the United States’ spiraling trade deficit. This tariff was temporary and was supposed to last 150 days, until July 24. Mr. Trump said he would raise it to 15% but never did.

The US Court of International Trade also found them illegal, but the appeals court postponed this decision.

What new research has created more uncertainty?

In March, the U.S. Trade Representative (USTR) office said it had opened two investigations under Section 301 of the Trade Act into several trading partners that could potentially see more tariffs imposed on them.

The initial investigation into 16 economies, including India, was to see whether these economies were using excess productive capacity to export to the United States, harming American businesses.

The second was to examine against 60 countries, including India, whether those countries had taken “adequate steps” to ban imports of goods produced with forced labor and how failure to “eliminate” these practices affected U.S. workers and businesses.

As part of its investigation of forced labor, the US government in early June proposed imposing a 12.5% ​​tariff on imports from 54 countries, including India, on the grounds that they “failed to implement and effectively enforce” bans on imports of goods produced using forced labor. Of course, this does not mean that India uses forced labor, but it does mean that it has not stopped imports of goods produced using forced labor.

India has made representations to the USA on this issue and the last hearing is on July 7. The findings of the overcapacity investigations are expected to be released in mid-July.

What is India’s stance on the agreement?

As Mr. Goyal has repeatedly stated, India remains committed to finalizing a trade deal with the United States but is also adamant that it must gain a comparative advantage over its rivals, as agreed in February. This will require completing Section 301 investigations and determining tariffs for various countries.

Meanwhile, the two sides continue negotiations on other non-tariff aspects of the agreement, such as increasing market access, digital trade, supply chain flexibility, reducing non-tariff barriers and expanding cooperation in strategic sectors. No deadline was specified for USTR Jamieson Greer’s recent visit to India on June 23-24.

It was published – 25 June 2026 12:22 IST